Coal is a major contributor to the world energy supply. In 2003, coal represented approximately 26% of the world’s primary energy consumption and was also the fastest growing energy source in the world, according to BP Statistical Review. The primary use for coal is to fuel electric power generation. In 2003, coal generated 53% of the electricity produced in the United States, according to the EIA.

According to the EIA, U.S. coal production has increased by 79% during the last 30 years. In 2003, total U.S. coal production, according to the EIA, was 1.07 billion tons. The Powder River Basin accounted for 37% of the total volume of U.S. coal production in 2003, with Central Appalachia accounting for 21%, the Midwest accounting for 14%, the West (other than the Powder River Basin) accounting for 14%, Northern Appalachia accounting for 12% and Southern Appalachia accounting for 2%, according to Platts.

Central Appalachia, including eastern Kentucky, Virginia and southern West Virginia, is the second largest coal producing region in the United States (21% of 2003 production). Coal from this region generally has a high heat content of between 12,000 and 14,000 Btus per pound and a low sulfur content ranging from 0.7% to 1.5%. From 2000 to 2003, according to Platts, the Central Appalachian region experienced a decline in production from 263 million tons to 228 million tons, or a 13% decline, primarily as a result of the depletion of economically attractive reserves, permitting issues and increasing costs of production, which was partially offset by production increases in Southern West Virginia due to the expansion of more economically attractive surface mines. Platts estimates that Central Appalachian operators marketed approximately 67% of their 2003 coal sales to electric generators, principally in the southeastern U.S., with the remainder serving steel producers in the U.S. and internationally. Central Appalachia is the primary source of U.S. coal exports.

In general, coal of all geological compositions is characterized by end use as either steam coal or metallurgical coal. Heat value, sulfur and ash content, and volatility in the case of metallurgical coal, are the most important variables in the profitable marketing and transportation of coal. These characteristics determine the best end use of a particular type of coal.

Cost of other revenues increased $5.4 million, or 47%, to $16.9 million for the first nine months of 2004 as compared to the first nine months of 2003 due to a higher volume of equipment sales and higher processing and handling fees as a result of increased volumes.

Depreciation, depletion, and amortization increased $13.5 million, or 52%, to $39.4 million for the first nine months of 2004 as compared to the first nine months of 2003.

Selling, general and administrative expenses increased $19.1 million, or 114%, to $35.8 million in the first nine months of 2004 compared to the same period in 2003.

Interest income increased from $0.1 million to $0.3 million as a result of interest received on notes receivable issued in the first nine months of 2004.